Attention first-time homebuyers… I just bought my first house and have some tips to share that might help you!
Are you thinking about buying a house for the first time? Not sure where to start?
My personal experience might be helpful to you since I’ve recently been in your shoes — and I definitely have some valuable lessons to share as a first-time homebuyer.
Here’s what it’s like buying your first house and some important things you need to know before signing on the dotted line…
It’s Normal To Be Nervous
Admittedly, I was nervous about buying my first home. But as the process unfolded, I soon realized that buying a house is not as difficult as I thought it would be.
I had these factors working in my favor:
- I was working with a good bank (actually a credit union).
- I had a reliable real estate agent on my side.
- I did a lot of homework before diving into this life-changing purchase.
What follows is a summary of my experience going through the steps to buying a house for the first time — from start to finish.
STEP 1: Get Pre-Qualified To Buy A House
Becoming a first-time homebuyer wasn’t really a hard decision for me. I had dreamt about buying a home for years!
What kept me back from diving into this expensive purchase was the fact that I didn’t want to “settle” on just any home and I wanted to make sure that I had enough money to buy a home.
I had recently gotten a new job and realized that my income was such that I could afford to buy a home in a neighborhood I grew up near. I knew that it was a safe place to live that was convenient to the places I like to shop, dine, and hang out.
So I filed for a home pre-qualification with my credit union. This served 2 purposes:
- It told me how much money they would lend me for a home.
- It proved to home sellers that I’m creditworthy to buy a home.
Lesson #1 For First-Time Homebuyers:
If you haven’t purchased a house before, then you will probably qualify for several first-time homebuyer incentives (like a bond or grant that pays some of your down payment or a lower down payment than is usually required). I qualified for a 3% down payment — which is much lower than the traditional 20% down payment! The only downside? I have to pay mortgage insurance until my equity in the home builds to 20% or more of the loan’s value — but that’s pretty standard stuff.
STEP 2: Decide How Much Money You Want To Borrow
I ended up qualifying to borrow a much larger sum of money than I cared to use to buy a home.
Lesson #2 For First-Time Homebuyers:
You don’t necessarily want to get a loan for the full amount they say you can borrow! Banks tend to push the envelope on how much they say you can afford to spend on a house. Don’t spend all your money though — or you might end up tighter each month than you wish to be. I spent about 70% of the amount the bank said I could borrow. My mortgage payments are pretty comfortable for me, and I’m so glad I didn’t spend every last cent that the bank told me I could borrow!
STEP 3: Find Houses For Sale
Once I had a dollar figure in my head that I knew I could afford, I began working with a realtor to see what homes were available in the neighborhood I wanted to move into.
The realtor sent me listings of houses for sale within my price range in the areas of town I liked the most.
While my real estate agent was very helpful in finding local homes for sale, it was during my own search for homes that I stumbled upon a little gem that had just been listed. I immediately called my realtor and asked if I could see the house.
We quickly arranged for a showing that morning, and by that afternoon I had seen the home and fallen in love with it. It was a recently remodeled mid-century ranch home on a 1/4-acre corner lot near a lake and public golf course in the neighborhood I wanted to live in.
By the next morning, I had decided that I wanted to make an offer on the house.
STEP 4: Make An Offer On The House You Want To Buy
My real estate agent ran a search on comparable prices for similar homes in the neighborhood where the home is located.
Realtors typically call this process “running comps.” What it does is help give the buyer an idea of a fair price to offer on the home.
Lesson #3 For First-Time Homebuyers:
Just because a homeowner is asking for X-amount for their home, that doesn’t mean you have to offer that amount. If the seller is asking $225,000 for the home but the comps come back at $215,000, you and your realtor might decide that a fair offer is $215,000 — or an amount just above or below that. Of course, the homeseller is not obligated to accept your offer. In fact, they may insist on a higher amount (a counter offer) or only consider higher offers from other homebuyers. But before you decide to spend more money on this house, it may be worth considering a lower offer. (This info may not be helpful if you’re buying a home in a really competitive market, or there are other reasons why a higher offer makes sense for you.)
In my case, the real estate agent and I decided to make an offer slightly below the asking price and also include a stipulation that the seller pay some of the closing costs.
STEP 5: Negotiate
The seller countered just a bit, and we struck a deal where I was paying a couple thousand dollars less than the asking price and getting the equivalent of about $5,000 in closing costs paid for.
This provided me with a huge cash savings — less upfront, out-of-pocket money!
Lesson #4 For First-Time Homebuyers:
It’s more than just the down payment you need to worry about when buying a home. Closing costs are another significant sum of money that has to be paid when you’re buying a home. Closing costs cover the legal fees and other sums of money that must be exchanged to help complete the transaction of buying a home. Sometimes sellers will offer to pay for all closing costs, and other times you may be able to negotiate that they pay for some of the closing costs. You should discuss this with your financial lender and your realtor to see whether or not seller-paid closing costs are an option for you when buying your first house.
STEP 6: Pay A Deposit
Now that the seller had agreed to the negotiated terms, it was time to deposit my earnest money — which secures the home and gets applied toward the purchase of the house.
STEP 7: Schedule A Home Inspection
Next, I arranged for a home inspection. It cost me $525 to get the house inspected, and it was the best $525 I spent!
My home inspection included:
- Overall home inspection
- Termite inspection
- Wind-mitigation inspection
- 4-point inspection covering the electrical system, roofing, heating & cooling equipment, and plumbing
I accompanied the home inspector on his tour of the house. He found the following:
- The roof was brand new (big plus!)
- The water heater was functioning, but old and on its last legs (hmmm…)
- The central heating & air system was aging and needed some work to help carry it through another few seasons (again, hmmm…)
- There were a few electrical outlets that needed replacing (ok…)
- The house had no signs of termites, current leaks, or other major problems (yay!)
For a home built in 1956, the report came back extraordinarily well. I also liked that the home had been owned by the same family for its entire existence — so they could tell me the entire history of this house. (And they did, too!)
STEP 8: Revise Your Offer (If Necessary) Based On The Home Inspection
After getting the home inspection report back, I decided to add a few minor conditions to my offer on the house:
- I wanted a new water heater included in the deal.
- I was hoping to get those electrical outlets repaired or replaced as necessary.
- I asked to have the central heating & air system repaired.
The seller agreed to those terms, and the home-buying process continued.
Lesson #5 For First-Time Homebuyers:
After a home inspection, you’ve got only a few days (more or less, depending on the terms of your contract and state laws) to decide whether or not you wish to go through with the purchase of the house. Based on the condition of the home, you might determine that you’d like to have repairs made prior to closing, or you may decide not to follow through in buying the home.
STEP 9: Finalize The Loan
Now, with the terms in writing, it was finally time get the ball rolling.
The contract went to my credit union — which began the process of finalizing the loan.
There were a few things the bank needed:
- A home insurance policy — this I arranged with the same insurance company that takes care of my auto insurance policy. Of course, you should shop around for home insurance and get the best deal with the best terms available to you.
- More verification of my income and creditworthiness — FYI, these credit checks will almost certainly ding your credit score for a short period of time. Don’t say I didn’t warn you!
- A home appraisal — if the home appraised for much lower than I offered, then the credit union likely wouldn’t cover the entire requested amount of the loan and I’d have to kick in cash to meet the difference (…which could lead to the home contract falling through).
STEP 10: Wait For The Loan To Be Approved
So, a few weeks passed before I finally got the news I’d been waiting to hear:
- My loan was approved.
- The home appraised at just a little more than what I had offered to pay for it.
- My payments, including principal, interest, taxes, and insurance (or PITI) would be right at the amount I could afford.
It was real estate kismet. We had a closing date all set up, and everything was shaping up for a smooth closing!
Lesson #6 For First-Time Homebuyers:
Many first-time homebuyers forget there’s much more to the monthly mortgage payments than just the principal and interest. There are also taxes and insurance on the home, and there’s also mortgage insurance. Many communities have Home Owners’ Association (HOA) dues and Community Development District (CDD) fees — which need to be paid monthly, quarterly, or yearly. Don’t forget, you also need to pay utilities (electric, water, sewer, trash, etc.), cable, internet, and other fees, repairs and upkeep, and save for future repairs and necessities, such as a new roof, new kitchen appliances, and other things that will eventually — and inevitably — pop up. Ooh, boy… Homeownership is expensive, but so much fun and rewarding!
STEP 11: Sign Forms Before The Closing
The last 5 business days before closing are some of the busiest days for first-time homebuyers.
Several e-documents were sent to me for approval and signing. I also received cost analysis forms — with a breakdown of what I would need to pay (cash out of pocket) in order to close on the house.
At this point, the wheels are in motion and closing on the house is all but a certainty — except for any drastic, last-minute problems, such as a job loss or lingering property issues that were negotiated in the contract but not resolved by the seller. Ideally, you will have some contingency clauses stipulated in your contract that protect you and your earnest money throughout the purchase process.
STEP 12: Do A Final Walkthrough
On the morning of the closing, I had a meeting with sellers, their real estate agent, and my real estate agent to conduct a final walkthrough.
The pre-closing walkthrough gives everyone a chance to ensure that:
- The property looks as it should.
- All repairs and replacements as agreed on in the contract were made.
- There were no last-minute problems — like a flood caused by a broken pipe.
Lesson #7 For First-Time Homebuyers:
Don’t be shy during the final walkthrough. If something is amiss, point it out. This is your last chance before you assume ownership of the home to (hopefully!) get a major problem addressed if it hasn’t been already.
Off we go to the closing!
STEP 13: Close On The House
We met at a virtual office — where the sellers, their real estate agent, my real estate agent, a closing agent, my fiance, and I convened to sign all of the documents required to close on the house.
It took about 2 hours to finish signing the paperwork in order to transfer the house over to me. (It was understandably emotional for the sellers, who grew up the house during the 1950s, ’60s, and ’70s.)
The home was legally transferred — I became a first-time homebuyer!
I hope these lessons that I learned along the way are helpful to you during the process of buying your first house.
More Tips For Buying Your First House
In addition to the links I’ve included above, here are some other resources for first-time homebuyers that I’ve found helpful:
- First-Time Homebuyer? Here’s How To Create A Budget
- 5 Foolish Mistakes First-Time Homebuyers Should Avoid
- 5 First-Time Homebuyer Mistakes
- 7 First-Time Homebuyer Mortgage Programs
- 8 Home Inspection Mistakes That Cost Homebuyers Money
- 23 Things First-Time Homebuyers Should Know
- 26 First-Time Homebuyer Tips From Top Real Estate Agents
I’m a roller coaster junkie, a weather enthusiast, a frequent traveler, and a numismatist. My love for coins began when I was 11 years old. I primarily collect and study U.S. coins produced during the 20th century. I’m a member of the American Numismatic Association (ANA) and the Numismatic Literary Guild (NLG). I’ve also been studying meteorology and watching weather patterns for years. I enjoy sharing little-known facts and fun stuff about coins, weather, travel, health, food, and living green… on a budget.